News & Media

How Fracking Saved California Politicians From Themselves

Chuck DeVore | Forbes

Napoleon Bonaparte said, “I’d rather have lucky generals than good ones.”

This maxim holds true for much of life, including, to a certain extent, politics. In 2006, I was a member of the California legislature when Gov. Schwarzenegger and a majority of lawmakers set out to “green” California’s energy landscape.

In addition to fighting global warming, another argument used to promote renewable energy at the time was that a looming natural gas supply crunch would lead to higher prices and shortages for home heating and electricity generation in California. Natural gas has traditionally played an outsized role in the Golden State’s energy mix.

Bolstering the green case was the fact that by 2004 American natural gas production had plateaued for the past 40 years. That year, the U.S. Department of Energy projectedthat American natural gas production would increase by a modest 10% over a decade, leaving the U.S. far more dependent on imports. The California Energy Commissionnoted that California imported 87% of its natural gas and that “The U.S. long term supply/demand balance outlook is pessimistic.”

To supply the natural gas California needed in a tightening domestic market, eight liquefied natural gas (LNG) terminals costing about $5 billion were proposed at sites ranging from the coast of Northern California 840 miles south to Mexico. These facilities would import natural gas from such far-flung places as Algeria, Australia, Indonesia, Malaysia and Qatar.

Then fracking happened.

New hydraulic fracturing techniques supercharged U.S. oil and gas production. Domestic natural gas supplies started to ramp up in 2006. Last year, America produced 41% more natural gas than it did in 2005. As a result, the price of natural gas plummeted 70% from 2005 to 2015. That 2004 Department of Energy forecast? It underestimated 2015 U.S. natural gas production by 34% while vastly overestimating needed imports by seven-fold.

one of the proposed West Coast LNG terminals were built—they weren’t needed (winning political permitting approval even if they were needed would have been another matter).

On the cusp of this remarkable energy revolution, liberal California politicians were vying with each other to phase out fossil fuels while mandating more renewable energy. In 2006, the California Legislature passed, and Gov. Schwarzenegger signed, AB 32, theCalifornia Global Warming Solutions Act, which aimed to make steep reductions in carbon dioxide emissions. The same year, SB 1368, a bill which prohibited the renewal of electric generation contracts from coal-fired power plants, was signed into law. These laws, and other initiatives, would fundamentally change how California generated its electricity.

At the time, supporters claimed that phasing out coal power and switching to renewables would come at no cost to the consumer. Even one of the state’s largest publicly-regulated utilities, Pacific Gas & Electric (PG&E), supported the anti-coal bill. Buried in SB 1368’s language was a provision allowing California’s publicly-regulated utilities to double their profit with renewable energy projects—a classic example of crony corporatism.

A decade later, supporters of California’s green energy push might be forgiven for claiming victory: The Golden State’s electricity costs were some 44% above the national average in 2006 and, relative to the nation, rose only slightly to 45% above the U.S. average in 2014 all while almost doubling the amount of power generation from more expensive renewables from 10.9% to 20.1%.

The irony is that California’s apparent success in remaking its electrical market is entirely owed to fracking, a technology that most of the liberal authors of California’s ongoing decarbonization experiment oppose.

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